(FORTUNE Magazine) – OPTICAL NETWORKING EQUIPMENT hq: Chelmsford, Mass. founded: 1998 sales: $28 mil. (2 qtrs.) employees: 105 privately held address: www.sycamorenet.com

Could this be Deshpande Vu all over again? Desh Deshpande and Dan Smith, the chairman-CEO team that built Cascade Communications (Cool Companies, class of 1996) and sold it to Ascend Communications for $2.6 billion two years ago, want to top themselves with their latest venture, one-year-old Sycamore Networks. They've already developed their first optical networking products and since March have booked revenues of nearly $30 million. No other networker--not Cascade, Ciena, or even Cisco--has ever left the starting gates so quickly.

Deshpande decided to get into optical networking when he ran into Sycamore's other founders, Rick Barry and Eric Swanson, at a 1997 Christmas party hosted by Matrix Partners, the Waltham, Mass., venture firm that had bankrolled Cascade. Barry and Swanson were researchers at MIT's Lincoln Labs, where they had built the world's first network made exclusively of high-speed fiber-optic wires and all-optical equipment--as opposed to networks based on electronic equipment. Matrix wanted them to quit academia, but only after meeting Deshpande did they feel they had found the right partner for a new company. After leaving Ascend, Smith joined them in summer 1998. The two ex-Cascaders give Sycamore a leg up on other optical startups, since the pair already know most of their potential customers--the CEOs of the major telcos.

Deshpande and Smith want to work with those carriers to do nothing less than change the nature of the Internet, by giving its backbone the flexibility to respond to sudden demands for bandwidth. Sycamore's first products, called "optical transport nodes," make it possible for carriers to give two customers a higher-bandwidth link at lower cost than standard equipment now allows. As more of these nodes are added, the backbone will, in essence, be delivering greater bandwidth. In fact, the backbone will eventually be pumping so much data so fast that it will require more sophisticated products, the "optical switches" that Sycamore plans to make next. Today, installing optical equipment requires a team of white lab coats who descend upon a telco's network and tweak it for months. In the near future, Deshpande predicts, "if you need a big pipe, your carrier will call Sycamore, and the network will be up the next day."

Sycamore's hardware could then help carriers charge people for the bandwidth they use--one rate for sending e-mail, say, and a higher one for videoconferencing. Or carriers could build specialized, extra-bandwidth networks within the Net--one for all the traffic going to Yahoo's Website, for instance, and another for Disney's. As is true now, Sycamore's rivals will be Lucent, Nortel Networks, and Ciena.

Some of the savviest technology investors are backing Sycamore. In addition to Matrix, they include Amerindo Investment Advisers, Bowman Capital Management, and Integral Capital Partners. Roger McNamee of Integral, who invests in some 20 private tech companies a year, says, "There is no cooler area than this. Nothing more important is going on in the Internet than the transition from copper to fiberglass." Will Sycamore go the way of Cascade and be sold? Says Matrix general partner Paul Ferri, who sits on Sycamore's board: "It is not something we are going to consider. The intent is not to make the company worth $1 billion and sell it to someone else." Asked about plans for an IPO, Deshpande quips, "Our goal is to raise money from our customers." Nevertheless, don't be surprised if this puppy's public within 12 months.

--Erick Schonfeld